Silicon London is first choice of base for Google, Facebook and other tech giants

The capital’s young workforce and wealth of start ups are behind last year’s doubling in demand for office space for IT firms

Tech clusters are springing up all over London as international heavyweights including Google, Groupon and Facebook expand and scores of startups try to establish themselves.

Three weeks ago Spanish telecoms group Telefónica, which owns O2, chose Regent Street, central London, as the headquarters of its new global digital business. Telefónica Digital will take the fourth and fifth floors, totalling 51,000 sq ft, in the Crown Estate’s Quadrant 3 development near Piccadilly Circus, which also contains a Whole Foods store and two restored 1930s Art Deco restaurants.

Matthew Key, chief executive of Telefónica Digital, said: “London is undoubtedly at the forefront of the current digital revolution and was a natural choice for us to establish our new headquarters in.

“London is arguably the biggest hub for technology startups outside Silicon Valley and a global centre for the media and advertising industries. It attracts the best talent and, for an international business such as ours, acts as a unique bridge between Europe and the Americas.”

While overall demand for office space in central London fell by 27% last year, take-up from IT and telecoms firms more than doubled between 2010 and 2011, according to a report called Silicon London by property consultancy Knight Frank.

Tech firms acquired 1.3 million sq ft of office space, compared with 640,000 sq ft in 2010 – despite a slowdown in demand from other industries, in particular finance. Major technology firms acquiring offices in London included Apple, Expedia, Facebook, Google, Groupon, Nokia, O2 and Lastminute.com. At the same time, the office space available fell by 1.5m sq ft in 2011 to 16.8m sq ft – supply peaked in 2009 at 23m sq ft.

According to Knight Frank there were almost as many tech sector deals last year in W1 as in EC1, though East London is a booming tech area. Aside from the creative hub in Shoreditch, near to Old Street, known as the Silicon Round about, home to more than 300 startups, tech clusters have sprung up in Clerkenwell, Covent Garden, Fitzrovia and the South Bank.

Chris Lewis, Deloitte’s head of technology, media and telecommunications (TMT) real estate, said: “There is an unstoppable move east within the tech super sector. Slowly it will have tentacles reaching across all of central London.”

He added: “15 years ago the TMT sector didn’t really exist, most of the brand names we recognise today didn’t even exist five years ago. Their requirements for space are pretty extraordinary.” Lewis said that, over the past four years, tech and media companies had become the second-most important sector in central London in terms of take-up of new office space, after financial services. Last year, it accounted for the biggest share of new take-up.

However, he pointed out that most of the big tech company office moves were to traditional locations, rather than venturing out to the East End.

In the biggest letting in the West End last year, Google agreed in May to a 10-year lease for 160,000 sq ft of space at Central Saint Giles, the brightly-coloured building designed by Renzo Piano, the Italian architect responsible for the Shard. The US internet search giant has taken three floors and parts of two others in the 12-storey building, which also comprises apartments and shops, on the edge of Covent Garden.

Google, which also has two offices near Victoria and is hiring rapidly, can exit the Central Saint Giles lease in 2017 and there is talk that it might build a new campus at King’s Cross Central.

Expedia has moved to Angel in north east London where it is taking 81,000 sq ft over two floors at the Angel Building, while Facebook has taken over the online travel firm’s old building at Seven Dials in Covent Garden, four years after it opened its first office off Carnaby Street.

Tech companies are attracted by London’s young population, with 45% of Londoners aged between 20 and 44. Nokia recently moved from Hampshire to Paddington, citing an inability to recruit quality staff.

Despite appeals from David Cameron and London mayor Boris Johnson, Twitter opted for Dublin, where corporation tax is lower, rather than London as its European base, but the microblogging site still wants to beef up its advertising sales office in London’s West End.